Wednesday, December 28, 2011

Updated November 2013Back
in late November, I posted an article outlining Iran's contribution to the
world's natural gas resource base. As you may recall, Iran is one of the
world's leading producers of both natural gas and oil; it is OPEC's second
largest oil producer and exporter after Saudi Arabia and, in 2010, was the
world's third largest exporter of oil after Saudi Arabia and Russia. In
this posting, I will be taking a look at Iran's oil industry, particularly
since they have threatened to shut down the Strait of Hormuz, a very narrow
body of water near the exit and entry point of the Persian Gulf through which passes 15 million BOPD or one-sixth of the world's supply of oil.

Iran
is a founding member of OPEC. According to OPEC's website, Iran has the third largest oil
reserves among the 12 nations that comprise the cartel as shown here:

OPEC's
oil reserves of 1193 billion barrels make up 81.33 percent of the world's total
oil reserves. Among OPEC nations, Venezuela has the largest reserves totaling
296 billion barrels and Saudi Arabia has the second largest at 264 billion
barrels. With reserves of 151.17 billion barrels, Iran has 12.7 percent
of the world's total oil reserves. Iran is OPEC's second-largest oil
producer and the world's third-largest crude oil exporter (or fourth largest
depending on the source).

Here is a map showing Iran's main oil and gas
fields and pipeline infrastructure:

Iran
has 40 producing oil fields, 27 onshore and 13 offshore with
medium sulphur content crude and gravities ranging from 28 to 35 degrees API. Onshore
fields comprise just over 70 percent of Iran's total oil reserves with
over 50 percent of the nation's reserves confined to just six supergiant fields
including its largest field, Ahvaz. The vast majority of the fields are
located in the northwestern part of the country adjacent to the Iran-Iraq
border. Data available from OPEC suggests that Iran exported
approximately 2.438 million BOPD to Asian and OECD European nations; in
comparison, the United States Energy Information Administration (EIA) estimates
that Iran exported over 2.2 million BOPD in the first half of 2011. As of
2008, Iran was producing an estimated 4.3 million BOPD of which roughly 3.8
million BOPD was crude oil. At these rates, if no additional oil was ever
discovered in Iran, the country's reserves would last for 95 years. In
2008, Iran consumed 1.73 million BOPD of its own production; these levels are
rising as the population grows since most of the domestic consumption is
related to the use of both diesel and gasoline. Here is a graph showing Iran's total
oil production and consumption over the last 4 decades:

One
of Iran's energy and fiscal problems relate to its high level of energy subsidy. In
2009, Iran's gasoline price was approximately 10 cents per litre. The
Iranian government proposed removal of these subsidies which would have raised
the price of gasoline to 40 cents per litre, a 400 percent increase. Here
is a look at other proposed energy price changes which were announced in
December of 2010:

Here is a graph showing how rapidly Iran's gasoline
consumption rose over the past three decades:

Interestingly
enough, this energy-rich country had imposed gasoline rationing which began in
2007. In the three years following rationing, the gasoline quota per
individual was reduced from 120 litres per month to just 60 litres per month!

Just
prior to the Iranian Revolution, Iran's oil production was in the 6 million
BOPD range. Imposition of international sanctions and a high rate of
decline in Iran's oil fields pushed daily oil production down to approximately
1.5 million BOPD by the early 1980s. This has since risen to around 4
million BOPD and it is estimated that in 2011, Iran's crude production has been
in the range of 3.6 to 3.65 million BOPD, above its OPEC target of 3.34 million
BOPD. Natural declines in Iran's aging oil fields are an ever-present
problem; an estimated 400,000 to 700,000 BOPD are lost to natural declines on an annual
basis. To combat this, Iran's oil fields require massive infrastructure
investment including enhanced oil techniques using injection of the nation's massive natural gas resources to repressurize reservoirs.

Most
of Iran's oil exports end up in Asia. Here is a chart showing Iran's top
export destinations for 2010:

Iran's
largest volume of exported oil is comprised mainly of Iranian Heavy Crude. In
2010, Iran's net oil export revenues were approximately $73 billion, providing
roughly half of Iran's government revenues. For the first half of 2011,
China, India, South Korea and Turkey have all increased their imports of
Iranian crude as export volumes are reallocated to countries that have less
stringent sanctions in place. Here is a chart showing how export levels
by country have changed (increased for Asia (excluding Japan) and decreased for Italy) for the first half of 2011 as compared to 2010 above:

A
number of new oil discoveries have been made in Iran over the past 2 years. The
National Iranian Oil Company (NIOC) announced the discovery of light oil in the
Khayyam offshore field in May 2011; the field has estimated recoverable oil reserves of
170 million barrels. As well, at the same time, Iran announced the
discovery of new onshore oil and gas fields in the south and west of the
country that contain an estimated 500 million barrels of oil.

Development
of the infrastructure necessary to produce oil from new discoveries is hindered
by international sanctions. The massive North and South Azadegan Fields
(discovered in 1999) contain 26 billion barrels of proven oil reserves in a
very complex reservoir. China, through its China National Petroleum
Corporation (CNPC), is developing the north portion of the field. Japan's
INPEX had signed an agreement to develop the southern portion, however, it
pulled out of the project in October 2010 due to international pressures. Guess
who stepped in? You're right - a subsidiary of CNPC! China has
agreed to invest $8.4 billion over the next 10 years. As well, China's
Sinopec has signed on to develop another promising field, Yadavarn, which
should be producing up to 185,000 BOPD by 2016. Overall, according to FACTS Global Energy, Iran's discoveries of crude oil
and condensate totaled 10.7 billion barrels of oil in 2010 alone.

From this posting and my posting on Iran's natural gas resources, you can see that Iran is most certainly
key to the world’s overall energy picture. While they have become a pariah state in the eyes of many
world leaders, their production contribution to keeping the world’s oil
production levels at or above the overall level of demand cannot be denied. With that in mind, it will be
interesting to see how long it takes before the leaders of the developed world
take matters into their own hands and enact measures that will result in regime
change, all in an effort to control Iran’s massive energy resources. As I've pointed out before, one thing will hinder their plans; it will take a massive effort to unseat China from their role as supplier of capital to the resource-rich pariah nations of the world.

20 comments:

What would it look like if Iran not only shut down their oil, but also Saudia Arabia and Qatar for example. It they are backed into a corner, what would stop them from bombing oil manufacturing of other MAJOR oil exporters. The Americans and Isrealies better be careful. If oil exports dropped by 30 or 40% overnight and took several years to get back online, Iran could do more damage to the World economy than anyone could possible realize.

while that danger is true the shortage (if it occurs) will force developed countries not only in the west to look for alternatives and fast. there is no other better motivating factor than a good price shock....

If US attack Iran, it will give a great chance to China for becoming the super power in the world. I think the world will be dominated by China. China has billions harder worker and advanced educational system with smartest people. US will be the fortieth state of China in 2050.

Iran is not any third world country that can be invaded so easily. The US can't even manage to pacify Afghanistan let alone invade Iran. It has tried to encircle Iran through wars in Iraq and Afghanistan but been forced to retreat by the Iranians. Best you check your facts.

invasion is what both the war machine in the US and the Iran government (at least some factions) WANT ! that would give the Mullahs the best chance to further enhance their regional power while millions of people will suffer. The exact same thing that happened in Iraq. US did the Iran's mullahs a big favour by attaching Iraq already

Drill in North America - Convert all trucks to Natural Gas - Build Nuclear everywhere there isn't a known and active fault line. Use all means necessary to force regime change wherever it is required to ensure the flow of oil to the US in the meantime. If China bows up, knock the paper tiger down by blowing all pipelines out of the middle east heading towards China as like all Communist or Socialist Countries, they are FAKE and will fold like a cheap suit when faced by a true super power.

Burn the 5th fleet, ha, try that one and watch all hell rain down as the power in that one fleet rivals almost all the rest of the world's force combined. Iran will last only days against the 5th fleet and the people in the street there will gladly take power from the Mullahs after the bombing ends...

Unfortunately, one day there will be a war where the gloves come off. A war where collateral damage becomes trivialized (or becomes an achievement), a war where the number of soldiers don't matter, and a war where it doesn't help getting out of your uniform and hiding in the population. This is how war evolves; when conventional weapons are pared by unconventional tactics; guerrilla, urban warfare, cold war, e-war, religious ware (fanatic, kamikaze), the urge to use ultimate destruction becomes real. WWII was also Nuclear War I. The fact that the Japanese were nuclear unarmed (theirs wasn't "ready"), didn't stop the US to use a couple. (They only had three, I was told).A sleepless life for the pilot, a couple scientists, and a nation that didn't even get the significance of the act.

Ultimately, their are no "clean" and "dirty" weapons, "clean" and "dirty" tactics. There is no humane way to kill people, every soldier if somebody’s son or daughter, brother or sister, father or mother; nobody is born to die on a battlefield.

Once it's escalated enough by the cost of human life, or the financial burden on a country, the ultimate weapon comes out of the box. Be aware for a war where they have no ground troops. Forget Vietnam, Korea, Kuwait, Iraq: ground troops. It doesn't even matter whether you can throw one or two back, or plant one on a delicate place. It will serve as a hind-sight justification for the act. The act will come down to a genocide. Remember the Armenians? Most people don't. Its a matter of time and will be used as a deterrent for when you challenge "the Boss". The biggest threat for Iran is making a bomb, unless they could have really kept it silent. Too late.

When looking at the numbers you posted from OPEC, the U.S. doesnt import oil from Iran. The countries that are at risk are in the EU (greece, spain, Italy) . OPEC has arpund 2.8 million barrels a day of spare capacity, which it can fill the shortage of Irans 2.2 million barrels a day. The problem that could occur is if Isreal decides to attack before the west, and EU come to an agreement to fufill sanctions and replace Iran oil with other supplies.

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About Me

I have been an avid follower of the world's political and economic scene since the great gold rush of 1979 - 1980 when it seemed that the world's economic system was on the verge of collapse. I am most concerned about the mounting level of government debt and the lack of political will to solve the problem. Actions need to be taken sooner rather than later when demographic issues will make solutions far more difficult. As a geoscientist, I am also concerned about the world's energy future; as we reach peak cheap oil, we need to find viable long-term solutions to what will ultimately become a supply-demand imbalance.